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Watching the stock market has been a harrowing experience lately as investors grapple with the Trump administration’s ever-changing tariff plans and their effects on the economy.
On Yahoo Finance’s Stocks in Translation podcast, Morgan Stanley US chief economist Michael Gapen noted that President Trump’s policies have made regular economic data “really noisy,” which is complicating investors’ outlooks on the market.
For a more reliable reading of the economy’s health, Gapen said investors should look at the monthly employment report.
He added that the key measure to watch is whether the US labor market adds jobs at a sufficient pace to keep wages above inflation.
“If we’re not [adding jobs sufficiently], the economy is going to slow down,” Gapen explained (see video above or listen below). “I think there’s enough cushion where, as long as we’re adding [100,000] to 150,000 jobs a month, we’ll be OK. The further you start dropping down below [100,000], you have to question the sustainability.”
So far, the jobs report has shown that the labor market seems to be holding up amid heightened policy uncertainty. In March, the US economy continued to add jobs at a robust pace, with 228,000 new jobs created, though the unemployment rate also rose slightly to 4.2%.
And on Wednesday, Federal Reserve Chair Jerome Powell offered some additional reassurance about the health of the US labor market.
“Wage growth has continued to moderate while still outpacing inflation overall,” Powell told the Economic Club of Chicago. “The labor market appears to be in solid condition and broadly in balance and is not a significant source of inflationary pressure.”
Investors will get another update on the labor market on May 2, when the April jobs report is scheduled for release.
Gapen also noted that the immigration story is just as important as tariffs for the outlook of the US economy right now.
In March, US Customs and Border Protection reported 7,181 crossings at the southwest border — the lowest level in recorded US history. During the same period a year ago, the US saw 137,473 southwest border encounters.
Cracking down on immigration has been an early priority of the Trump administration, which has been pushing for “mass deportations” and more scrutiny on green card and visa holders, among other tactics. The drastic decrease in immigration is likely to affect the growth in the US labor force, Gapen asserted.
